In 2025, Finance Minister Jack Chambers has not yet made a decision about altering the collective duty on the principal three banks from the present steady rate of €200 million. On Tuesday, Chambers confirmed that the bank tax level, established in 2014, would be retained for another year.
He hasn’t yet determined the precise structure and composition of the fee but pointed out the banks’ considerable profit margins, partially resulting from the interest rate increments in recent years. Since Ulster Bank and KBC exited the Irish market in 2022, the levy, which used to render around €150 million per year, decreased to €87 million, leaving only the major Irish banks: Bank of Ireland, AIB, and PTSB.
Michael McGrath, previous finance minister, proclaimed during last year’s Budget announcement that the levy would be increased to a total of €200 million for the three banks, in light of their augmented profitability.
On Tuesday, Chambers verified that he will prolong the levy for an added year, arguing that the current economic stability and prosperity in the country has led to the banks recording strong profits. He stated: “It’s absolutely suitable for banks to continue contributing to the State given these conditions.”
He mentioned that the ultimate decision regarding the levy’s extent would be up to the Cabinet, as part of the 2025 Budget to be revealed on October 1st. The bank levy was inaugurated ten years ago, after banks started to regain profitability following the financial collapse. The State offered €64 billion in recapitalisation aid to five banks, namely AIB, Bank of Ireland, PTSB, Anglo Irish Bank and the Irish Nationwide Building Society, during that period.
The amount of the tax fluctuates each year, intending to gather roughly €150 million in state revenue. It plunged to €87 million in 2022 following the withdrawal of KBC and Ulster Bank from the Irish market. In that year, AIB, Bank of Ireland, and PTSB contributed €37 million, €25 million, and €22 million respectively.
Mr. Chambers has not yet disclosed whether he will advocate for an elevation in the levy, considering the ongoing high profitability of banking institutions. Defending the perpetuation of the levy in his address, he stressed that it is fully justified for banks to continue their financial contributions to the State. The income generated by the levy, according to him, would provide him with additional flexibility to ensure a significant income tax scheme and opportunities for further alleviation of tax pressure on households and employees in the context of the 2025 Budget.
He emphasised his acute consciousness of the fact that numerous individuals continue to grapple with living expenses, hence providing additional assistance is a paramount concern for him and the government in the forthcoming budget.
In the aftermath of his announcement, there have been calls for non-conventional banks to be encompassed within the levy. Peter Stapleton, a Fine Gael councillor from Wicklow, proposed that digital banks should also fall under the levy’s purview.
He suggested that the levy should be expanded and imposed on online banks to incentivise them to establish branches and offices across Irish cities, towns, and communities. Forefronting the negative impact of lack of physical branches on local sites, he invited fresh entrants into the Irish banking sector like Bankinter, Bunq, Revolut, N26, and others, asserting that they have entered the State because it is lucrative. He warned that if digital banks only benefitted from profits, it would ultimately prove detrimental to Irish communities.